Canadians opting for shorter mortgage terms as they hope for declining interest rates - BNN Bloomberg

Samantha Brookes, founder and CEO of Mortgages of Canada, says that before the Bank of Canada started raising interest rates last year, a five-year term was the norm for most homebuyers, but that's changed. People are now going shorter in hopes that interest rates will come back down in the coming years.

The"term" of a fixed-rate mortgage is the length of the contract with a set interest rate on your loan. When the term is up, if you haven't fully repaid your loan, you will have to renew your mortgage for a new term at the prevailing rates. It is different from the amortization period, which is the total time taken to repay the loan.

In its spring 2023 residential mortgage report, the Canada Mortgage and Housing Corp. said fixed-rate mortgages with a term of five years or more made up just 13 per cent of new and renewed mortgages in January this year, while those between one and three years made up 36 per cent. Still, RBC mobile mortgage specialist Jimmy Aramouni says the clients he’s seeing are tending toward shorter terms as they wait to see where interest rates headed.

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